"The Road to Ruin" is the Bacon's Rebellion blog dedicated to transportation and land use issues in Virginia.

Sunday, February 12, 2006

Surplus Wars

Gov. Tim Kaine says flat out no way is he going to go along with using general fund surpluses for transportation, as the House GOP leaders would like to do. Here's a Daily Press story on Kaine's reaction to the House GOP funding plan, which was presented Friday afternoon.

'"We will solve this problem but not by raiding the budget of William and Mary or any other college," Democrat Kaine said. "I will not let that happen."

Kaine handwrote the pledge onto his prepared text after Republicans in the House of Delegates proposed a $2 billion transportation plan Friday. It would use new debt, stiffer fines on drivers and surplus cash in the general fund. Kaine portrayed that plan as unrealistic and unfair to other state services that depended on the general fund.'

"It seems the Senate and the governor have defined transportation crises in terms of raising taxes," said Del. Vince Callahan of Fairfax County, the House budget chief, "but not in terms of how we will specifically address choke points and other measures that voters can identify with."

The plan exploits two financial advantages that state government has going for it. First, the healthy economy has filled the budget with excess cash. Second, Virginia has a low debt capacity - in effect, there is room on the credit card.

The plan earmarks $552 million in the next fiscal year from the budget surplus, using it for one-time construction projects.'

40 Comments:

Perhaps I don't understand the 'general' fund, but I think it goes like this:All the financial needs of the state are put together and it adds up to $XX billion. Then the tax rates are set to extract that amount from the economy by estimating economic activity.

The "surplus" is due to greater economic activity than estimated; ie the tax rates were based on significant underestimates of the economy. It's moot whether the underestimates were deliberate or not, the surplus is proof of underestimating.

So the surplus --the amount over and above current needs-- is only as temporary as the current, stable and growing economy. Surplus tax revenue is an "established, fiscally responsible, long-term, stable source of funding" that Kaine so adamantly insists on.

Taxes and fees that are imposed with no particular nexus to a particular program go into the General Fund. The opposite of the General Fund is a Special Fund, created with revenue for a special purpose -- college tuitions, gasoline taxes for roads, hunting license fees to run that program, there are scores if not hundreds of special funds. Federal funds, which also show up tagged to particular programs, are special funds.

Because Virginia is bound by law to spend within its means, there will always be some "surplus" at the end of the fiscal year. But it also true that the General Assembly in its wisdom has already earmarked that anticipated revenue for the rainy day fund, water quality improvement fund, etc. They spend on auto pilot.

Early this year the House Appropriations staff estimated that the state had $5.6 billion available after funding what is called the "base budget" -- the cost of continuing the state's status quo. Of that $5.6 million in left over funds or anticipated revenue growth, the House plan dedicated only one dollar in eight to transportation ($700 million). That is up from the other two plans, but is still fairly small considering all the talk of using the surplus to solve this problem. They ain't doing it anymore than the Gov or the Senate.

Oh, and a hundred million or so targeted to relieve congestion in Northern Virginia and Hampton Roads combined is the equivalent of giving an aspirin to an elephant. So ineffective it borders on an insult.

Here's a question - does anyone think the House leadership is misreading the public mood on this? I'm struck by the contrast - the new governor is going to rallies and hosting 'town hall' meetings to get people behind his position, but the GOP? They drop their long-awaited funding plan on the public on a Friday afternoon. Which suggests that maybe they wanted to hide it, but that doesn't make sense, so it suggests that they couldn't care less what anyone thinks. They're digging in.

Now aside from whether you agree/disagree with their approach, they at least ought to be out there pushing a little harder to persuade the public..

Gee.. somewhere I must have misunderstood the difference between operational and capital funds.

VDOT estimates a 100 Billion dollar CONSTRUCTION backlog.

Folks can argue whether it is really 50 or 150 or whatever but the point is that unless the state is going to borrow 2 billion a year for the next decade - and commit themselves to paying it back out of the general fund that even ordinary folks with their own household budgets allocated between living expenses and a mortgage will clearly understand.

I continue to be dismayed that the conservative folks who trumpet personal responsibility and sound business practices support a public policy that is neither.

One might argue that the problem is really about cost-effectiveness and sustainability but the path towards addressing those issues is not achieved by playing games with the fundamental concepts of operational and captial funding.

The one thing I do agree with is the idea that if our population is growing that more money is coming in - and one might ask the question why that increased money is no longer capable of funding transportation needs.

But I think on that same basis, it's pretty clear that the gas tax is not indexed with inflation and higher gas prices will result in consumer strategies to reduce consumption thus reducing the amount of money generated from the gas tax - even if it will be indexed.

So, the current funding stream is clearly not sustainable and hard decisions need to be made with respect to sustainability and cost effectiveness.

If the Republicans are so gung ho about not "gouging" taxpayers, then where is their "plan".

What they have now is not a plan but an evasion of their basic responsibilities.

Somebody will no doubt try to tell you that the reason funding is not adequate is because of our settlemet patterns, which may be partly true. But no mter what other magic we pull out of hat, your arguments still hold.

We have avoided our responsibilities for years and now it will take years to catch up.

I suspect that any plan that does not include some restrictions on development will not play well in NoVA. I'm not arguing that those restrictions would be necessarily fair, equitable, well thought out, or useful. I do believe, however, that the development issue has reached the "tipping point" with a large number of NoVA residents. Many just want to see a time-out on development, whatever that means.

There is a very strong distrust of elected officials on land use matters, with a feeling that those individuals of both political parties fail to protect the public interest to the extent permitted by law. There remains a strong feeling that elected officials have no well-thought-out transportation plans beyond "let's just keeping laying more track in front of the out-of-control train." This latter feeling probably stems from the first factor.

I don't think that the anti-tax feeling is as strong as the belief that spending hundreds of millions of new tax dollars each year to augment transportation facilities will not produce a measurable improvement in the ability of people to get from Point A to Point B more quickly. LOS Ds and Fs would likely stay LOS Ds & Fs.

One might compare transportation spending in Virginia to the use foreign aid in some, but not all, under-developed nations. The money is raised and sent, but never seems to be spent on the projects that really help people. Just about anyone who knows about the Transportation Board believes its members are generally operating with conflicts of interests and a desire to manipulate the funding process to enable new development in select locations. Why give more money to this crowd?

The vastly unfair relationship between NoVA's payers and the rest of Virginia adds to this overall situation. While one would and should expect that NoVA would always contribute more to the state fisc that it receives because of income difference, NoVA's needs for state funds are regularly sacrificed to keep local taxes dirt cheap in much of Virginia. As Vince Callahan often says, when state aid to education is increased, many counties actually cut their real estate taxes. Growth in NoVA may well benefit the state, but adds little to NoVA residents not directly or indirectly involved in development.

There is a huge disconnect between NOVA's local officials and local business leaders and almost everyone else. As GMU's Stephen Fuller has noted, only 42% of the Metro economy is related to local business. Yet, most elected officials and so-called business leaders (Board of Trade, Chambers of Commerce, etc.) operate as if everyone has the same stake in issues as they do. Why would federal employees, national trade association leaders, lawyers with federal law practices, etc. care about the ability of a commercial landlord to fill its brand new office building or a developer of a condo complex to make money? Local business leaders don't spend their time worrying about national or federal issues that affect the financial status of these "non-local" workers/business owner, why is the converse expected?

Those favoring more development could best make progress by realizing and acknowledging that, not only do many (most?) NoVA residents not care about the success of these ventures, but rather, they would probably just as soon see a five-year moratorium on building in NoVA. That would be a good first step to some dialog that could result in some real progress over time.

We need changes in the win-lose equation. Not every change should necessarily come from the hides those who want more development or to sell one's land. But, under today's circumstances, why would the 58% not involved in the local economy support much of anything that preserves the status quo?

I realize the strong incentives for those supporting development to try to stall just a little longer. But, if the tipping point has indeed been reached (ask Marc Herring what he thinks), stalling will only result in more punitive legislation later.

Off my soapbox. My money is on further stalling by the development industry and head-in-the-sand tactics by NoVA's local business community and most of its elected officials.

Bob, To answer your question whether the House is mis-reading the public mood. In an interview Friday, House Speaker William J. Howell cited a recent Rasmussen poll indicating that only 24 to 28 percent (he couldn't recall the exact number) favored a tax increase for transportation. He also cited his own constituent surveys -- and he represents a lot of NoVa road warriors with long commutes -- and only about 35 percent favor higher taxes. One can argue with his analysis, but that's what he's acting on.

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As a career-long journalist, I'm a publisher of blogs and electronic newsletters. I am deeply concerned about the irresponsible direction our country is taking, especially the decline of ethics in our business and political classes.

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